Stocks Better Bounce Soon or Else I’ll Have to Revise the WOLF STREET Dictum, “Nothing Goes to Heck in a Straight Line”

Even a dead-cat bounce that makes your ears ring would do.

By Wolf Richter for WOLF STREET.

Stocks are down ferociously at midday today, with the S&P 500 Index down 3.8%, the Dow Industrial Average down 2.7% and the Nasdaq Composite down 4.5%. This follows a large-scale and widespread and relentless selloff that for the Dow and the S&P 500 started on the second trading day in January; and for the Nasdaq in November. By this morning, the Nasdaq was down nearly 20% from its intraday high in November.

By Friday at the close, the S&P 500 Index had dropped through the 200-day moving average, and combined with a huge mega-boom of the type stocks had experienced after March 2020, is not a common occurrence, and in the past has been followed by serious selloffs and crashes. By this morning, after the steep losses, the S&P 500 Index was down 12% from its high. This all came in the span of three weeks, with each week having been a loser.

The Nasdaq and the Russell 2000 fell into the negative for the 12-month period, having surrendered all of their gains plus some that they’d obtained over the prior 11 months (gray line). The Dow is still up 10.7% (brown) and the S&P 500 is up 12.8% (purple) for the 12-month period, having surrendered in three weeks about half of their huge gains of the prior 11 months (index data via YCharts):

These kinds of sudden widespread losses day after day, week after week, are screaming for a bounce.

Any bounce would do. Whether this would be what traders call a “dead-cat bounce” that then leads to more losses, or the beginning of something new, well, we’ll see. But there needs to be a bounce. There always is.

Traders are always eager to pick the bottom of the drop if for nothing else but a brief and violent ride up because the craziest rallies occur during the pauses in broad sustained sell-offs, and so they dive in, and they’re buying what others are selling. And for days and weeks, these dip buyers got carried out on stretchers. But some day, there must be a bounce.

This selloff has been particularly brutal for holders of many most-hyped meme stocks, SPACs, and IPO stocks that have collapsed by 60%, 70%, 80% and some by 90% from their highs. And dip buyers were relentlessly beaten up.

And there better be a bounce soon or else I will have to revise the WOLF STREET dictum, immortalized on our beer mugs: “Nothing Goes to Heck in a Straight Line”:

Some of the biggest stocks are down massively. Midday Microsoft was down over 5%, and by nearly 20% from its high in November. Netflix was down over 8% midday, and down 48% from its high in October. These kinds of sustained drops are screaming at least for a dead-cat bounce of sizeable nature.

Here are the 10 biggest losers at midday in the S&P 500 Index and their declines from their 52-week highs:

S&P 500 Biggest Losers Today Price Today % From 52-Wk High %
1 Moderna $144.36 -9.8% -71.0%
2 Netflix $365.57 -8.0% -47.8%
3 Signature Bank $302.14 -7.4% -19.2%
4 Xilinx $173.99 -7.4% -27.2%
5 DISH Network $29.57 -6.9% -37.1%
6 Lincoln National Corp. $63.36 -6.6% -18.3%
7 NVIDIA $218.76 -6.4% -36.8%
8 Expedia Group $163.32 -6.4% -14.9%
9 Freeport-McMoRan $38.46 -6.2% -16.4%
10 Enphase Energy $118.25 -6.2% -58.1%

No matter what happens to the market over the next few weeks or months or years, one thing we know for sure for sure, Nothing Goes to Heck in a Straight Line, so to speak. That’s my story and I’m sticking to it. And we’re due for a bounce that could make your ears ring.

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  316 comments for “Stocks Better Bounce Soon or Else I’ll Have to Revise the WOLF STREET Dictum, “Nothing Goes to Heck in a Straight Line”

  1. Wisdom Seeker says:

    Wolf, you should time-stamp the bottom calls … this one might be legendary. And if not, you can do what the big-propaganda boys do and memory-hole the post!

    • andy says:

      Cashed in all Feb, March, April puts today when VIX was close to 40. Kept Jun, Sept. Crazy rally maybe coming, or not.

    • RH says:

      Actually, the market crash that I predicted, with about a hundred others admittedly, may not be as bad as expected: war spending has a multiplier effect. Russia’s and China’s decisions to imitate Fascist Italy and Nazi Germany closely are prompting other nations to rearm frantically.

      • nick kelly says:

        Russia makes real stuff? Where is it sold so I can see some?

        • Wolf Richter says:

          nick kelly,

          For example, Russia is the second largest arms exporter behind the US. Sophisticated equipment too, such as fighter jets, anti-aircraft missiles, etc. The defense industry (all state-owned) is huge in Russia. Also, automakers have set up shop in Russia. There are other examples.

      • Niko says:

        nick kelly,
        You are aware that German GDP PPP barely edges the Russian one, no? Then, you will be surprised that Russians produces ~2 million cars a year. They are the largest producer and exporter of grain (wheat, ray, oats,…) in the world. They are top 3 producer of gold, silver, platinum, vanadium, nickel, cobalt, and top 10 producer of all other industrial metals. Russia is also the largest holder, exporter, and leading supplier of hydrocarbons to EU and USA. It is sold at your local energy distributor. Their IT dominates the finance, gaming, security, actually EVERYTHING successful in IT is outsourced to Russian developers. They have the code and know how to use it. Losers get the Indian coders. Top armament, robotics, and space explorations are firmly in their hands. They have the greatest % of college/university graduates in the world. So, nick kelly, you are actually buying vastly more Russian product then the average Russian buys American. Depending on the energy, IT and agricultural mix and cost, you possibly buy more Russian than Made in USA stuff. The stuff doesn’t get much more real, no? Except for some fine American crypto, NFTs, on-line education, and inter-sectional sensitivity training.

      • Isaac S. says:

        @Niko,

        So, what you say should mean Russia goes into a deep depression upon getting cut off from the SWIFT system, in combination with far deeper sanctions on its imports. ROW (esp. US, OPEC, and India) will be pretty happy about all the extra demand for their products and services. Go ahead Russia… make our day…

      • nick kelly says:

        WR: of course I knew that Russia was a huge arms maker and exporter, and that’s about it. But when the guy lumped it in with China, ‘THEY make real stuff…’ it implied something like China’s incredible growth of consumer exports. There aren’t any.

        And yes, foreign car makers have set up shop in Russia to supply Russians, there being no indigenous maker.

      • Sams says:

        @ Isaac S.
        The depression would hit hard in the rest of Europe too. The gas pipelines go where they are, the infrastructure to replace natural gas from Russia is not in place. Makes for a cold and dark winter. With reduced electricity supplies manufacturing in Europe will be hurt too.

        Then, if Europa and the USA do cut of the supply of industrial metals, do you think the price will be unaltered if other suppliers exists? China on the other hand can probably do favourable deals with Russia, cutting costs and price their products below the European and US competitors.

        Last with Russia good at it, also the malicious side of it, thrown out of the SWIFT system, what about the SWIFT system?

      • nick kelly says:

        ‘you are actually buying vastly more Russian product then the average Russian buys American.’

        No doubt Russia buys very little from US or anyone. What would they use to pay for it?

        • Wolf Richter says:

          To put some numbers on this: the US imported just $17 billion worth of goods from Russia in all of 2020, which is not even a rounding error in the $2.3 trillion of total US imports.

      • Turtle says:

        This reminds of of when U.S. Olympians were bringing in their own bottles of Sriracha because they knew it wouldn’t be for sale in Sochi. It’s always good to plan ahead.

      • WBL says:

        nick kelly

        Russia is an invisible giant in IT services.

        Telegram, the messenger second only to WhatsApp? St. Petersburg.

        Miro, an $18bil IT company making circles after their $400mil Series C? Perm.

        Ever used Bumble, the dating app? The engineering platform and the app was done by Russians sitting in Moscow.

        EPAM systems, part of S&P 500 with 40k employees? Minsk, Belarus.

        Revolut, a $60bil “British” fintech? Moscovites.

        Nginx, the web server that runs the bacend of an Internet? Developed from Moscow.

        Flo, a mensies tracking app in use by one in ten American women? Minsk.

        And those are the companies founded by Russians – how many more rely on development centres placed in Russia? At Google, Facebook, Intel, Nvidia globaly?

        The list goes on, and on, and on, and on. You’d be surprised how many apps you have on your phone are written and maintained by Russians (and probably concerned).

        Russia is pretty much the only nation in the world bar US and China that has their own global search, maps and taxi (Yandex); social net with close to a 100% penetration of all Russian speakers (VK); IM (Telegram); public cloud (Sbertech – no AWS or GCP in Russia); ecommerce with global logistics (Ozon – no Amazon in Russia) – their own first-class technological stack. As a result, Russian is the second most used language on the Internet – more than Spanish, French and German combined.

        Russia is surprisingly advanced in IT – head and shoulders above Europe, although obv lagging behind the States due to the lack of capital, electronics and the access to global market – cut covering this gap tremendously fast.

        And if you’d ever travel through Russia, well… The chances are, the navigation and announcement would be in Russian and Chinese, not in English. The level of cooperatin is astonishing. Samsung, LG, Sony, Apple etc are being rapidly pushed out by Xiaomi and other Chinese brands.

        Outside of IT, there’re medical drugs, chemicals, energy production (including nuclear), aerospace, trucks etc etc. Russia actually beat US to produce the first COVID-19 vacine that worked, Sputnik-V, only to be striped of the fame by petit political rivalry. It’s second most spread vacine globally agter Pfizer, apprved in 90 countries. It beats Modena. How many countries globally have the capacity to develop one?

        Americans tend to dramatically underestimate Russia, on all fronts, thinking of it as a third-world plutocratic petrostate that slowly dying on its own, akin to Venezualla. But it’s not. That’s getting high on your own supply. It’s a massive country with vast resources and good HDI. It has lots and lots of problems, for sure. None of them are fatal though. What’s more important, it’s one of the very few countries that can stand on its own in almoust every aspect.

      • Niko says:

        @Isaac S.
        When airheads start talking about SWIFT… Dude, SWIFT is a Belgian co-op, owned by member financial institutions. You and your geriatric president cannot cut a country off of it – it’s not yours silly billy. (our prime minister is younger but VEEERY slow). UN can pass a resolution with economic sanctions targeting Russian banks, but as we know Russia can veto, and China too. And WTF do you think SWIF is? SWIFT network is like any other network, SWIFT standards are ISO standards, it is a notification system – not even settlement. You can send payment orders via pigeons and settle however you want, not to mention that both Russians and Chinese have the working alternatives. It is not a nuclear option, except for the SWIFT members – you know – the banks. I’d know, I’ve architected solutions around it, also Basel 1,2,3, SOX, FATCA, AML/ATF, and many other across finance and other various industries.

        @nick kelly
        Majority of car sales in Russia are Russian brands.
        Majority of car sales in US are foreign brands.

        Again (see WBL), Russians built the critical code for everything of value in this World, even they do not own it, they have it and know how to use it. In the meantime we are importing people from and outsourcing work to India as if they don’t have average -25 IQ below Russian. They are lost in cloud technologies. But hey we’ll make it up on volume, like Tesla, and we also have a Bitcoin to fix that.

        We should be worried of this sabre-rattling and airheads arguing “but, but Russia’s GDP is smaller than Italy’s, they are trash”. No they are not. American mil. budget is all salaries and pork, for Russians it’s all R&D and training. It is mutually ASSURED destruction. Where in the last 25 years have we lost the sight of annihilation being assured. Assured. You talk about SWIFT? Russian bear is a small, easily tameable bear? That’s your statement, Kelly?

        Also, this Russian hysteria is a red herring. Nothing is real, except for the economic hole under us.

      • nick kelly says:

        ‘Avotvaz
        According to Artem Manuykhin, director of the press office at Avtovaz, in 2019 Lada finished vehicles and automotive kits were exported to 35 countries, with 50,000 finished vehicles sold to non-Russian customers, 32% up on the previous year. “Exports tripled as compared with the level we had in early 2017. The most important markets are still Belarus and Kazakhstan, where Lada is the number-one brand in terms of sales,” he says.’

        The only countries buying Russian cars are those more backward than Russia. When a 50-100 % duty was placed on Japanese imports, protests erupted.

      • 91B20 1stCav (AUS) says:

        faj-well said. Remote and non-human soldiery (drones-see effect on traditional armored units in the recent Azeri-Armenian conflict and autonomous kills in Libya) present a serious new wildcard, however…

        may we all find a better day.

      • NBay says:

        Check out “Drone Swarms” at Military.com

        They say they are considering going “Geneva Convention” and calling them WMDs, but I bet they are dumping a ton of money in them. Would be perfect for Martial Law, too…..which is…..
        Very scary stuff. Makes me look at “Self Driving Car Effort” in a brand new light……same hardware, same algorithms.

      • NBay says:

        I didn’t like posting that.
        It’s South Park day….gonna chow down and binge out.

      • 91B20 1stCav (AUS) says:

        NBay- ‘The Economist’ a couple of years ago ran a prescient article, recall its title being: ‘The Rise of the Slaughterbots’…

        Our endless quest for more-remote killing abilities dates back to the first thrown rock, but we may be approaching a point where the old verity that a ‘man with a weapon’ is necessary to hold ground even in the face of any techno-shivs no longer applies. Jokers, indeed.

        may we all find a better day.

  2. Bored Ape says:

    I’m glad the cash I kept on the sidelines is no longer trash.

    • Flea says:

      Once they fall 70% beware of dead cat bounce ,because they might fall more

    • JGarbo says:

      If it’s USD, it’s close to trash. Your 2000 $1.00 buys 60¢ today…

    • Turtle says:

      Inflation convinced me to start putting my cash in the S&P 500. Fortunately I’ve been dollar cost averaging it and didn’t lump it! Think I’ll slow those purchases down a bit and see how low things go! hate to be a market timer, but…

      • Bathelix says:

        I don’t think you’re going to hate being “a market timer” (which isn’t even what you’re doing really). Probably lookin good if you haven’t already bought all in. If you know how you could also sell cash secured puts so that way you either get in at a level better than the market by the premium you sold…or you just make some $ if it goes back up from the sold puts at high vol. Get’s more complicated but can be good “strategery”.

    • Old school says:

      Yep. I am running such a conservative portfolio I am up a few bucks year to date, but that could change tomorrow.

      • Stephen says:

        My portfolio is basically logistics equities, pipeline MLPs, farmland, and carbon credits. Up nicely during this recent sell-off, though the land being illiquid makes it hard to mark-to-market. Plan to subdivide and sell building lots, then 1031 proceeds into another field.

        Moral of the story…invest in the real, tangible economy. High cost of entry industries with value-added products. Done well so far.

  3. We need to expand that chart to show just how far we haven’t fallen. If this is an old school bear market you don’t need to call this top, there is plenty of time, and the first reflex rally usually retraces most of the losses. Everything is on the table, this isn’t the 2020 Covid plunge on the fear of the unknown. There was plenty of low hanging fruit to sell, SPACS, IPOS, Bitcoin. That much was easy. The real question what’s it all worth; consumer prices, stock prices, oil prices. This market wants to put a number on these things, taking into account the size of the money supply, (add Crypto) what should interest rates be? They should probably lean to the low side. A sudden contraction causes an inflationary shock, which is counter trend. Smart investors will wait, wait to borrow wait to spend. The Fed engineered this inflation and they aren’t backing off (really) because deflation is the ultimate waiting game.

  4. dishonest says:

    Good gravy. Recovery is on the way. Jerome must have read my earlier post. Plunge Protection Team reporting for duty sir.

    • Today was the first day that the futures really opened up a hole underneath, and now the day session has reversed their role as driver of the selling. Looks very much like a capitulation moment. There were a lot of technical glitches to resolve. Everything since October has been problematic. The Bull wasn’t on his best behavior. The Fed leaving a huge gap in real interest rates was probably the cause. The market still sees that as manna.

      • historicus says:

        AB
        “The Fed leaving a huge gap in real interest rates was probably the cause.”
        I think the damage caused by that is extremely understated.
        The Fed created this situation….. it is all on them…they were so far behind…….and so accommodative……..
        There are too many like minded people on the Fed Board….who was it Former Fed Gov Hoenig that tried to be the dissenting voice for so long?
        Did anybody at a Fed meeting say
        * We are really hurting people with this low interest high inflation situation
        *Maybe the bottlenecks are from businesses reaching for inventory because of the acknowledged and obvious inflation
        * Inflation hurts businesses too, with the higher input costs. That’s not good for earnings…..or stock prices.
        * What are we doing here?

      • Ralph Hiesey says:

        Of course it’s the Magic Invisible Hand of the market that caused all three markets to recover in exactly the right way to turn an otherwise disastrous stock trading day into a true winning miracle!! The three daily plots even all look the same, demonstrating true divine wisdom accomplished by a single Creator.

        No doubt, the Fed, and everyone on Wall Street must be equally astounded and thankful as I am by how such a thing could possibly happen.

        For those that agree, I’ve got a great deal for you: Please send a $25 million cashiers check for which I will sell you the Golden Gate bridge, beautifully packaged, from which you will receive a lifetime of daily tolls. Tell me how you want it shipped. I hate to part with it, but as a bonus I’ll even throw in that slightly used beer mug that Wolf Richter personally sent me, which is inscribed with a treasured Wall Street holy verse.

  5. qt says:

    From down 1000+ to only 400+ today… the markets are slowly crawling back. Lets see how MSFT and AAPL earning calls go this week. These two companies aren’t profitless MEMEs or SPACs. The whole markets depend on them doing well along with any positive FED announcements.

    Regardless, hold on tight for a roller coaster ride this year!

  6. John says:

    Show a chart of the 200 day SMA vs. the S&P 475 (the 500 without the highest tech flyers). That will be an interesting look at the truer state of the market.

    • Wisdom Seeker says:

      John, I charted the XLG fund (the top 50 stocks by size) vs. the S&P500 and there’s actually more damage occurring now in the Top 50 than in the lower 450. But the difference is small. XLG was strongest at the end of November (in a relative way). It’s given up 2-3% vs. the S&P 500 since then, with about 1/3 of that coming today.

      • RockHard says:

        Yeah I saw this comment and looked up the “S&P dividend aristocrats” – old companies who’ve paid a steady/increasing dividend for a long time, should contain little to no tech. Looks like it closed around the 200 DMA today, after dipping well below that. I guess the John Test is whether that holds.

  7. JC says:

    This has been 13 years in the making. I’ve been fooled before again, again … can’t help but think some garbage strategy will be dreamed up by some revolving door sociopath Wharton business school grad Goldman Sachs SEC Fed d-bags, the wasters and debtors will rejoice with another buying frenzy and my money will continue to die along with the American economy.

  8. Phoenix_Ikki says:

    haha Wolf, don’t worry I think you’ll still get your nothing goes to heck in a straight line motto validated.

    I commented on the other article but like I said, been seeing this picture way too many times and like Dubeyu, fool me twice..not gonna get fool again (follow by a stupid smirk just like Dubeyu). The market is calling Powell boy’s jawboning bluff on raising interest rates and today and last week is for them to put on a show and basically said “Don’t even think Fing dare”

    Weimar Powell likely took notice the last couple of days and I fully prepare him to say something like due to deteriorating market condition, we will slow our initial rate hike and tapering purchase projection..blah blah..Market will rejoice and we shoot for Mars instead of the Moon this time.

    As a caveat every time, I really hope I am wrong about all of this but unlike March of 2020, I am not betting on this is the new bear market. Think that can will be kick so far down probably beyond my lifetime at this point.

    • sunny129 says:

      Phoenix_Ikki

      ‘ I am not betting on this is the new bear market’

      I am!

      Without FED’s put, there is NO market of any sort!
      This is purely traders’ mkt! ( see my comments below)
      One could still make money but need to know option trading and judicial use of leveraged funds (both short & long!)

      • David W Young says:

        Monday was an intra-day Reversal day, most indices finished the day positive, but just barely. Am sure, since this is 2022 America, land of the manipulated marketplace, that the Plunge Protection Team operating out of the infamous New York Fed, had a hand in this reversal move to keep the lemmings from immediately going over the cliff; have to let their Fed insiders and the monied smart money get out first, heck with us commoners.

        Won’t be surprised if we don’t get a failed dead cat reflex rally today since it is not out of the realm of possibilities that the Fed sounds rather hawkish this week, keeping Biden’s approval ratings at least in the low 30’s, and hints at a March Fed Funds increase of 50 basis points; front loading of interest rate moves. Many big inflation numbers coming thru the supply chain python in the months ahead, and these guys are all about appearances, not actions, with double-speak and slight of hand as basic operating principles for the U.S. Federal Reserve. A very tainted financial institution that history will not be kind to.

        But the die is pretty much cast for the Stock Bear Market ahead, esp. with the Bond Market raising rates on its own due to surging Default or Credit Risk in a declining economy that is leveraged to its eyeballs. Corporate America has never had so much debt in relation to Total Assets on its consolidated balance sheet.

        China is also a Black Duck (vs. Black Swan) via its property development sector and snowballs rolling down very steep hills eventually turn into avalanches. Sell on the rallies. You and I may not live long enough to recover from financial market losses just over the horizon, esp. me at 73, hey, that rhymes!!!

  9. Tom15 says:

    The peasants are slowing awakening in countries across globe. No movie theater necessary.

    • BuySome says:

      The pops have pocket cinemas to go with their pocket pizzas. You might say the scratchy arssed masses are still picking their seats, just no longer in the local hall. Coming out of total state of supsension…maybe? But hardly at the point of any revolution of mankind. The costumes department has not been shut down yet. Cherry bon bons are still available. aNd the show must go on.

  10. Wisdom Seeker says:

    Followups to yesterday’s post:

    1) Based on the historical record, a negative close today removes from consideration some of the prior “bull bounces back” scenarios. That tilts the remaining outcomes towards the looming-crash and/or bear market scenarios.

    2) In the 1987 crash, the day after the market landed on the 200-day average, it went down another 5%. And the day after that all heck broke loose. So if the S&P closes down at the lows today, that tracks the worst historical scenarios.

    3) In the 2020 COVID plunge, the market cut thru the 200-day on 2/27, threatened a big plunge on 2/28 but rallied off the bottom (closing a lot less down). The market in 2020 did rally for a few days before turning around and plunging again on March 6&9. Today, if the S&P doesn’t swoon further into the close, it’ll look a lot like 2020 and we’d hope for at least a few days of rally and potentially an extended bull-bear battle.

  11. DawnsEarlyLight says:

    Whoopee Doo! Fed still QEing, S&P and Dow down 9%, and rates are exploding! Oh wait, treasuries(1.72%) are DOWN! LOL

    All jawboning and lipgloss!

    • historicus says:

      The talking heads are blaming this all on the Fed threat of four 1/4pt raises.
      Gimme a break.
      If the threat 1% Fed Funds are the blame, who ever is doing the blaming is CONFIRMING and ADMITTING the fragility of these markets. Can’t handle a 1% Fed Fund rate with 7% inflation?
      The markets acted terrible the day before 9/11 as I recall……maybe not this bad…….
      This is about Russia and war, or the threat thereof.
      But the talking heads all turn to the Fed…..their Savior, their Deity.
      Not this time. And rates are all ready pegged at zip…..the make it better buttons all punched.

  12. 2banana says:

    Looking forward to the tech stock implosion to the SF housing implosion analysis

  13. John says:

    Different kinda bounce coming up, especially going into fed meet. Ukraine? Never pays their gas bill when due. Not sure if other countries pay a toll to them. Nordstrom built for that reason.

  14. TimTim says:

    Wolf

    If you have limited original beer mugs left, may it is time to plan for a special edition when you order some more;

    Perhaps one with a Hong Kong Hamster on the side to represent retail investors…

  15. phleep says:

    My short bets were up almost 20 percent intraday while NASDAQ hit -4.50. Bouncing around now. The most leveraged are cleaned out, one tier. A friend messages to say he is down $70,000. A test of nerves now for those intermediate folks who might toss in a towel at the prolonged stress of sustained red (per Mandelbrot, time compresses in ways at these moments, so “prolonged” sort of shows up like a freight train), and say this mini-bounce is an opportunity to get out. It will be fascinating to watch the close, not to mention the week, and I’m back on the trigger to cash in some shorts. But mainly glad I bailed out of lots of longs in November.

    • Old school says:

      The big take away if you read Buffet’s writings is you don’t want to spend your energy predicting stock prices, you want to spend it reading boring SEC filings and building you model of future earnings for the company and figure out an acceptable buy price.

      Short and mid term stock prices are unknowable and you better have the balance sheet to handle a market panic.

  16. gorbachev says:

    Will they continue to taper?
    Are interest rate hikes still on the table?
    Get the band out. First Request.
    Don’t cry for me Argentina.

    • BuySome says:

      Wolf has reapeatedly covered how serious they are about the situation in front of them. Don’t fight the Wolf, just watch if he wags his tail.

  17. Teddy says:

    Wait’ll the pension holders realize that the Smart Money and In Crowd already dumped their Moderna shares into their retirement best laid plans.

  18. Phoenix_Ikki says:

    Really do wish we see this kind of drop in the Real estate market soon enough. Although like many times before I am not holding my breath, in this crazy world we live in, people will probably end up piling into RE even more as a flight to safety move.

    • phleep says:

      I love living in my new metaverse NFT palace.

    • AK says:

      I suspect you are right – as stock market crashes, big buck will run into residential real estate market for refuge, inflating prices into stratosphere.

    • TimTim says:

      Phoenix Ikki,

      Perhaps initially.

    • Old school says:

      I believe there will be opportunities in real estate again, but you better know what you are doing. For most it’s a highly leveraged decision.

  19. ivanislav says:

    The rebound is so strong it feels like we’re positive on the day. Still 1 hr to go, this dead cat could still turn green!

    • phleep says:

      Limit orders, margin calls, stopped out meanwhile. Time for junior to see if parents’ basement is still available. A generational lesson for the wise.

  20. Kenny Logins says:

    I’m intrigued to see what’ll happen to RE over the next 6 months, just as the Feds supposed interest rate rises come in.

    Will they really let RE and stocks tank, in essence to keep salaries down?

    Afterall, if inflation is hot and salary rises hot, what is the issue? Isn’t that good for deflating the debt?

    • TimTim says:

      Maybe the issue will be less clear one-directional travel, but almost Logarithmic volatility that leads to (despite central bank efforts to countermand disorderly moves) an overall loss of confidence that is difficult to ‘Ken.

      Ken = Northern English and West of Scotland dialect for understand

      • TimTim says:

        I haven’t the time to look, but it would be interesting to see what proportion of current interest is retail as opposed to other actors, on a background of overall levels of volume of trading.

    • Depth Charge says:

      Don’t think for a moment that it was by mistake that the FED owns 1/3 of all mortgages. They have a plan to try to not allow a free market in housing, propping up prices by not allowing a flood of inventory to hit the market should things turn south. Will it work? Dunno, but they’re sure as hell going to try.

      Which begs the question: Why is the FED actively working to destroy the future of the young, and bar them from being able to afford shelter? That action alone should be reason enough for them to go straight to prison for the rest of their lives. That has NOTHING to do with their mandate.

  21. Same Guy says:

    DIJA was under 29k at the start of 2020 and we’re still above 33k! Nothing to get excited about. Expect more gov meddling before it gets there.

  22. Phoneix_Ikki says:

    Plunge protection team is definitely on overdrive today. Half and hour left and only 300pts down, the way things are going, no doubt it will be positive by end of today.

    On a different note, guess that plunge protection team is playing favor to certain stock. Macy up 11% today, WTF? They better get back to work and make sure Tesla close the day above $900 or there will be hell to pay.

    • ivanislav says:

      investopedia dot com:

      “The “Plunge Protection Team” (PPT) is a colloquial name given to the Working Group on Financial Markets […] Conspiracy theorists have speculated that the group executes trades on several exchanges when prices are heading downward”

      So apparently they do no such thing and we have free markets, apart from Fed QE. And if you think they do make purchases, you’re a (dun dun dun) conspiracy theorist! Feel free to join me under the bridge, I’ve got an extra tin foil hat.

      • Phoenix_Ikki says:

        I do like this line you included “we have free markets, apart from Fed QE” haha the FED is the market…for all those that rail against Socialism…see the irony yet?

        I do like the bridge, don’t mind if I rock out to “Under the Bridge” by Red Hot Chilly Peppers while I grab that extra tin foil hat from you.

      • Wisdom Seeker says:

        The PPT is a bit like Santa Claus, and a bit like the Reddit WallStreetBets crowd.

        Every adult will say “Santa Claus isn’t real”, and yet every retailer will tell you that Santa Claus moves their markets every year, especially starting after Thanksgiving.

        And just like Santa Claus, all it takes is for people to believe in the PPT, and when it’s in their self interest, they act on that belief, just like r/WallStreetBets. And that’s all it takes for the PPT to have the power it’s imagined to have.

        WE ARE THE PPT – And spiritual forces do change the world!

        Although I’m not entirely sure this is the kind of thing Margaret Mead had in mind when she wrote “Never doubt that a small group of thoughtful, committed, citizens can change the world. Indeed, it is the only thing that ever has.”

    • TimTim says:

      ‘Plunge Protection Team’

      Aww Jeez people, a lifeguard is only as good as the direction they’re looking in.

      Who knows, as you point out, which direction ultimately they will be forced to look in.

      But…will it matter in the end, really, if enough damage is done flip flopping along the way.

      You don’t need a visible whirlpool for people to drown.

    • Wolf Richter says:

      Phoneix_Ikki,

      “guess that plunge protection team is playing favor to certain stock. Macy up 11% today, WTF?”

      Hahaha, no PPT needed. Just traders smelling an opportunity: Macy’s is up because Kohl’s got huge buyout offers from two sides. Kohl’s is up 36% today on the news.

      • Jake W says:

        but what explains the larger market? do any traders have the volume to move the market the way it did?

        • Wolf Richter says:

          All the sellers that were desperate enough to sell at these beaten-down prices had sold, and there were no sellers left at these prices. This is called capitulation. And when traders see that, they jump in and buy.

          This was obvious today. Suddenly, stock by stock, there was nothing for sale anywhere near the last price. The next ask was a bunch higher, and then suddenly someone grabbed it, and then the next ask was a bunch higher. This moved really fast.

          It was a case of capitulation from sellers, and when the buying heated up, the desperate sellers were all gone. And new sellers had to be enticed with higher prices. This was classic textbook today.

        • Jake W says:

          interesting. but how would a trader know that there were no sellers left, and that any subsequent sales would be for more?

        • Old school says:

          Jake,
          There is software that you can buy that shows you depth of market. I think most retail traders are totally outgunned by traders that have the deep pockets to have informational advantage.

          I like investing with a window of about 5 years or more because that is an area that most managers can’t play. They have to play the short game.

  23. Depth Charge says:

    There’s been a MASSIVE reversal. I guarantee it’s the PPT. I’d bet everything I own on it. They won’t allow a free market. Ever.

    • phleep says:

      Banks get to create money with Fed and FDIC insurance backup. That means cronies are on that train. Nice ‘work” if you can get it.

      Now comes the test to see if Powell has any minerals. The history is not encouraging.

  24. Mike T. says:

    JPowell must have made a 1-800-HELP-PPT call!

  25. nick kelly says:

    From minus 1000 to minus 200 must feel like a bounce to the guy who was down 1000.

  26. Saltcreep says:

    Uncanny timing.

    • georgist says:

      Exactly, it just ripped back up at the exact pace that would allow for just turning green on end of day.

      • Saltcreep says:

        Hi georgist, I was mostly thinking in terms of the timing of this publication, rather than the timing of the market move.

        As the article came out the bounce came in.

    • Wolf Richter says:

      Saltcreep,

      “uncanny timing”

      Wolf Street received the information from sources familiar with the matter that the Plunge Protection Team (PPT) was getting ready to do heavy buying in the afternoon. The sources didn’t want to be named because of their close association with the Plunge Protection Team and because of the confidentiality of the matter.

  27. Bob says:

    Old dictums applied to markets. We no longer have markets.

  28. MonkeyBusiness says:

    Yeah, I bet the next few days will be mostly green, but the selling will start again next week. The Fruit company (Apple) better deliver this week ……….

  29. Escierto says:

    The PPT is working furiously to finish in the green today. They got NASDAQ positive now just the S&P and Dow for the trifecta. I am surprised they let gold rise a few bucks but then they are too busy to suppress the price much.

    • phleep says:

      It’s in the green for the close. What a day. That’s a 4.5 percent rise from today’s bottom. Yet the PE multiples are still at nosebleed levels.

    • Old school says:

      I have no idea about plunge protection team, but if you have read about past crisis like Long Term Capital and 1987 crash, the Fed starts getting involved with Wall Street to try to prevent a panic.

      Computers have allowed so much financial market warfare to go on at high speed, who knows what is really happening. In the big picture it’s trading friction in the capital allocation process where novices are separated from their money mostly.

  30. Staunton says:

    I guess it’s time for Wolf to do an article on the PPT. (Plunge Protection Team) For those of you that want to know more, a fair bit of info can be found on investopedia.

    Tl;Dr: Large banks colluding with POTUS and FED to stop market plunges by strategically (aggressively) purchasing index futures.

    • nick kelly says:

      See WR’s reply above. He’s told you he thinks there is no such thing, it’s a conspiracy theory. (if I’m wrong WR can slap me, it’s happened before )

      Look, the Fed f&cked up, lowering rates already the lowest real rates in centuries. while being lashed by the President of the United States to lower them below zero: negative rates. This ‘Individual One’ described JP as ‘worse than China’ for not lowering rates further. The stew we’re choking on today was not cooked yesterday. It took over a year for those deeply negative ( real) rates to explode into today’s inflation.

      Now, new game in town. Fed told: ‘control of inflation # 1 priority’. Wall Street will not be happy. It lives on inflation.
      Suggestion for WH messaging: ‘We are here for Main Street’. And don’t add the obvious second half. Let the voters add it themselves.

      • Jake W says:

        yeah, but pelosi and other pigmen in congress are certainly not there for main street. hopefully the white house has the fortitude to tell them to buzz off.

      • nick kelly says:

        Important PS I just read over on ZH last nite.
        Controlling inflation is part of the Fed’s LEGAL mandate along with promoting employment.
        As the ZH writer points out, it would be tough to argue that the US is not already at full employment. So there is no way to justify low rates as a boost to employment. There is no way for the Fed to avoid raising rates if it complies with its mandate.

  31. Depth Charge says:

    This is actually one of the most comical things I’ve seen in my life. Such an obvious massive market manipulation has never before been seen.

    • phleep says:

      Back in October ’29, an insider-banker marched up on the NYSE floor and ordered a bunch of US Steel very visibly, to try to rally the market. Now it’s all electronic and instant. Just add zeros.

      • nick kelly says:

        The 29 attempt to rally failed. As WR as said, nothing goes up or down in a straight line. This rally is a typical bear market rally.
        Note: the Fed hasn’t actually done anything yet.

        Maybe after last week the market thought the ( non-existent) PPP would come to the rescue or the Fed would defy its guidance or Pelosi complained to JP or…whatever conspiracy your imaginations conjure up.

        • Wisdom Seeker says:

          This “rally” hasn’t succeeded yet either. All it did was arrest a 4.5% plunge.

          Tomorrow is a whole new game.

      • Mora Aurora says:

        Indeed, a history of direct market intervention and manipulation in 1929 (and 1907), during stock market panics:

        “Selling intensified in mid-October. On October 24, “Black Thursday”, the market lost 11% of its value at the opening bell on very heavy trading. The huge volume meant that the report of prices on the ticker tape in brokerage offices around the nation was hours late, and so investors had no idea what most stocks were trading for.”

        “Several leading Wall Street bankers met to find a solution to the panic and chaos on the trading floor. The meeting included Thomas W. Lamont, acting head of Morgan Bank; Albert Wiggin, head of the Chase National Bank; and Charles E. Mitchell, president of the National City Bank of New York. They chose Richard Whitney, vice president of the Exchange, to act on their behalf.”

        “With the bankers’ financial resources behind him, Whitney placed a bid to purchase 25,000 shares of U.S. Steel at $205 per share, a price well above the current market. As traders watched, Whitney then placed similar bids on other “blue chip” stocks. The tactic was similar to one that had ended the Panic of 1907 and succeeded in halting the slide. The Dow Jones Industrial Average recovered, closing with it down only 6.38 points for the day.”

        (Source: Wall Street Crash of 1929; Wikipedia)

        • nick kelly says:

          The play by Whitney is documented in a hundred texts, including Galbraith’s ‘The Great Crash.’

          ‘The tactic was similar to one that had ended the Panic of 1907 and succeeded in halting the slide. The Dow Jones Industrial Average recovered, closing with it down only 6.38 points for the day.’

          Some student with no knowledge of 29 might imagine, given only the above quote that once again, as in 07, a crash WAS averted. Actually the bankers’ expensive play bought them 24 hrs as the sell off continued.

          Was the point that attempts are made to support markets? Happens all the time, especially with attempts to defend currencies.

          When Charles Mitchell was seen entering Morgan’s again, there was hope a second attempt at ‘organized support’ was planned.
          Alas, as Galbraith explains, the banks were now worried about themselves and Mitchell’s visit may have been for a personal loan.

          Whitney had become seriously overextended to buy a cider business, would go BK and serve a prison term. Mitchell would later be arrested twice in one day as States and Fed’s vied for the honor. He avoided jail but had to regurgitate money he’d saved by and ‘transacting’ with his wife.

        • Mora Aurora says:

          Re: Richard ‘White Knight of Wall Street’ Whitney and ‘Sunshine’ Charley Mitchell:

          Today, the pair makes for a (not so) shocking but fascinating read into the intertwined webs of corruption and elite powers of that era and shows their truly selfish and desperate actions during the 1929 crash.

          Richard Whitney was a man who lived beyond his means, surrounding himself with luxury and power, swimming in the richest social circles of New York. Treasurer of the Yacht Club, President of the New York Stock Exchange, he was one of the most powerful men in the country.

          “Sunshine Charley”, Mitchell was elected president of National City Bank (now Citibank) in 1921 and in 1929, was appointed chairman. Also in 1921, he was elected President of National City Company, which became the largest security-issuing entity in the world.

          Whitney , the ‘White Knight of Wall Street,’ retired as President of the New York Stock Exchange in 1935 but remained on the board of governors. In early March 1938, he was investigated, tried and jailed for embezzlement to cover his mounting business losses and maintain his extravagant lifestyle.

          He stole funds from the New York Stock Exchange Gratuity Fund, the New York Yacht Club (where he served as the Treasurer) and $800,000 worth of bonds from his father-in-law’s estate.

          Mitchell, In 1933, was investigated by the U.S. Senate’s Pecora Commission as its first witness for his part in tens of millions of dollars in losses, excessive pay, and tax avoidance. In November 1929, U.S. Senator Carter Glass said, “Mitchell more than any 50 men is responsible for this stock crash.”
          (Sources: Wikipedia)

          So, a former President of the New York stock exchange went to jail? and a New York banking President was arrested twice?!

          Oh my, how antiquated yet refreshing to learn of this not too big to fail or jail!

          The ‘fines’ (fees and no pleas) of today serve to prevent the greater broadcast and reveals of such steals or I squeals.

    • Jake W says:

      the thing is, these types of things are actually emblematic of a third world country. where the leaders don’t even pretend that the economy, permitting, inspections, voting, and everything else isn’t rigged.

      we’ve become a third world country.

      • Depth Charge says:

        The tent cities confirm the fact. There was a class war. The rich won. It’s heads they win, tails you lose. Anybody thinking they will be fighting inflation at the expense of their own wealth is delusional. These pigs can never have enough, as evidenced by today’s rigged market.

        “There’s a floor under the stock market.”

        ~Speaker of the House, Nancy P.

        • Jake W says:

          yes. it’s basically a situation where they cheat, we know they cheat, and they know we know they cheat. but they’re basically sticking their thumbs in our faces, as if to say “yeah, and what are you going to do about it?”

        • Dan Romig says:

          Jake W,

          Succinct and true. Members of Congress and the Federal Reserve System are able to make trades, with leverage, just prior to decision time — where they make the decision — for their own personal gain.

          My answer to your rhetorical question is: Never have, nor never will I vote for a member of the Two Party Duopoly who is running for a seat in the U.S. Congress. Never have, nor never will I miss a vote in November.

        • Sierra7 says:

          Depth Charge:
          It’s called:
          “The Killing Floor!”
          (Like in slaughterhouses)

      • RobertM700 says:

        You don’t have to denigrate the third world. Just that the US is corrupt.

        • MiTurn says:

          And the world remains poor for the same reason: corruption.

          A few years back I was on Lake Victoria with my host, a native-born Ugandan. He pointed out two new tourist lodges being built by two Ugandan MPs. One was financed by Belgium with money intended for a low-income housing and the second by Sweden with money intended for new schools.

          Evidently not much oversight.

        • drifterprof says:

          MiTurn,

          Yeah, having lived in third world countries for an extended time (Peace Corps), my takeaway was astonishment that the rich donor countries often seem to lack oversight or any significant strings attached.

          Maybe it’s because the money is primarily for political influence, not actually helping those in need. And partly because the recipients would cry and accuse donors of unfair big-brothering if they were monitored.

          Religions do the same thing. For example, evangelicals in a small up-country town where I worked (West Africa) lived up on a hill above town, totally separated from life on the street. One of the students I sponsored told me that back in his home village, the evangelicals helped people out with medicine etc. only if they converted to Christianity. The student was a smart guy, and an honest Christian.

        • RH says:

          Amen. The best proof of that is if you check the US banks’ records, if you can access them. A little known fact is that many banks have “forgiven” hundreds of thousands or millions owed by millionaires/billionaires who “coincidentally” happen to be cronies of the banksters or “contributors” to their pet politicians.

          How that can be legal is beyond me! The banks receive huge QE commissions, “dividends” from their utterly corrupt “Federal” Reserve that funnels ultra low interest rate loans to them (even while the banks are insolvent after their assets decline in value, or perhaps, because they are insolvent), loans from the “Federal” Reserve when no other, rational lender would ever lend to them, effectively a guarantee that their debts will be paid (which lowers the interest rates that they must pay third parties), etc. Yet, they are “forgiving” the loans of millionaires/billionaires while they are simultaneously going after people that owe a fraction of that on student loans or credit cards.

          Such “forgiveness” of loans must be reported in 1099s, so the IRS would have records of such loan “forgiveness” by banks for their cronies and their friends. How are those not kickbacks for bribes (called contributions) paid to politicians to protect the banksters’ most precious asset, which they own, not the federal government, their “Federal” Reserve.

          Bribery in the USA is just more discreet and judges are bribed just as often which is why the news are filled with incredible criminals, e.g., serial rapists, who get special treatment: e.g., claims that a sloppy public announcement by a prosecutor immunized a wealthy celebrity from being prosecuted later. If a poor person tried that argument, he would have been laughed out of court.

        • NBay says:

          Drifter,
          I worked with a guy with an MS in physics. He was also one of the head Jesus Freaks at this old abandoned grammar school. I’d always bug him about believing that stuff and all his proselytizing.
          He finally said, “remove drugs, insert Jesus”, with appropriate hand/head gestures”.
          I really couldn’t argue with him as far as saving individual young kids from a likely downhill path goes.
          His knowledge did one good thing for us. We worked with a lot of Thorium Flouride and kept in it storage cabinets. He raised hell about how it decayed into Radon gas, and forced them to ventilate all the cabinets to the outside. Better than nothing, but we still had to work with it.
          If I die from cancer, inhaling that stuff will be the likely reason. They had plenty other nasty chemicals there, but mostly a lot of exotic heavy metals, As, Cd, etc, and very nasty solvents and acids, like Hydrofluoric, several of which are now banned. They were busted big time for dumping stuff outside several years after I left.

    • Wolf Richter says:

      Depth Charge,

      “Such an obvious massive market manipulation has never before been seen.”

      Nah, just a massive bear-market reversal followed by a bounce. There were huge bear-market reversals and much bigger bounces during the March 2020 crash — leading to huge one-day rallies. This is March 2020, S&P 500, daily percent moves, posted March 21, 2020. The craziest rallies happen in bear markets:

      • Jake W says:

        but those didn’t occur in the same day, did they? although i guess philosophically, there’s no real difference whether the reversal happens at 2 p.m. on one day versus during the overnight session.

        • Wolf Richter says:

          The intraday reversals don’t show on this chart, which only looks at closing data. But there were quit a few of them. The volatility in March 2020 was horrendous. The intraday moves were even bigger than the closes. It was a market horror show.

      • Depth Charge says:

        This one reeks like a trunk load of salmon in the AZ summer heat.

      • Swamp Creature says:

        This market action was deliberate. Purpose: to clean out all the losers who had stop losses. Now the market has a basis for a new short term rally so the day traders can make some money. As I said before, I’d rather go to the blackjack table or the horse racing track than play in this corrupt casino.

        • drifterprof says:

          If it was deliberate, who caused it, and how?

        • Old school says:

          We have such a massive amount of financial products. Computers made stock execution so cheap that Wall Street has to keep coming up with crazier and crazier products so they can have a profitable business.

          A broad based etf might have made a little sense to minimize cost. Narrow ETFs like the innovation ETF and the short innovation ETF are really just ways that Wall Street can skin the rookies, both buy the funds expense and then hired guns out smarting retail.

          And if 10,000 ETFs aren’t enough let’s have 10,000 crypto coins.

    • Tom S. says:

      You would think after 2 years of people dip buying you would recognize dip buying. We got a few more bounces before this one bottoms out. Gonna take a while for the inflation dats to filer through. VIX will stay hot.

  32. Phoenix_Ikki says:

    Tesla closed at $930. All is well with the world and market is aiming for the Mars or perhaps Pluto next for the next bull run.

    • phleep says:

      Putin and Xi and the Iranians called, all want to sing Kumbaya.

    • Old school says:

      Tesla stock holders losing it all, Elon Musk booted as CEO and the the company getting the General Motors bail out will probably mark the bottom of this cycle. At least a guy can hope.

  33. Harvey says:

    I’ll come in if somebody tells me where the bottom is. :-p

    • Old school says:

      Warren Buffett called it within a few weeks of the Great Financial Crisis bottom although that might have been a once in a life time event. He put a full page op ed in the Wall Street Journal.

      If you are a long term investor and things get washed out to the mean Price to Sales ratio, you probably can go in big but you might still be under water for a few years.

      A lot of people say let the markets get washed out and then put your risk money into emerging markets as they are already cheap and will get cheaper in a crisis.

  34. Depth Charge says:

    Now electronic tulips are joining the party. Shitcoin is back up over $37,000 – a move of $5,000 – and rocketing higher as I type. The party’s back on.

    • Old school says:

      You have to control risk in a portfolio. Remember reading a professor that said once your risk level gets to a certain level, you are going to get wiped completely out it’s just a matter if you die before it happens.

      Fed’s got too many people too far out on risk curve and if they stumble a lot of people going to say it’s a rigged game when they lose the lottery.

  35. VoltaMom says:

    Well at least the indexes closed in the green!

  36. R Russell says:

    OK. Now you have your bounce. All Indexes ended day positive, Dollar strong, BTC up, and the 20 year down. But we’re still below the 200 day SMA … barely. Is that going to turn the market down? Or are we looking at more declining markets. From my perspective we have barely made a scratch on more than ten year of insanity.

  37. sunny129 says:

    ‘Nothing Goes to Heck in a Straight Line, so to speak. That’s my story and I’m sticking to it’

    This is the typical secular Bear on it’s way down, with frequent and expected bounce backs- Bear trap or squeeze!? But the long trend is DOWN, no matter what!

    What day!
    DJIA went deep red to -1050 and back to green at+ 99 A 2000 points journey! Wow! This won’t be the last day of gut wrenching volatility!

    Today was ‘Xmas in January’ for those nimble,experienced Option trders to make money in both directions. My PUTS and inverse leveraged ETFs did excactly what I expected. Sold them and then bought back at relatively low, just before the end of the day. I was also buying calls when indexes went real deep red, b/c as Wolf says, NOTHING goes down straight! There will so many BEAR traps, which is usually obvious in retrospect!

    This is market for nimble traders and NOT for investors either short or long. Long way to the reversion to the mean, with LOWER of the HIGHS and LOWER of the LOWS! Who is willing to catch the falling knives tomorrow!?

    • Harvey Mushman says:

      “DJIA went deep red to -1050 and back to green at+ 99 A 2000 points journey! ”

      That would be an 1099 point journey :-)

      • VintageVNvet says:

        Cmon HM,,, the journey counts BOTH ways!!!
        At least some of us who have driven across USA hundreds of times count it that way…
        SO, yes, it was only 1149 or so ONE way, eh?
        And the ”net” distance was only right next door, eh?
        Wonder WHY???

    • Wisdom Seeker says:

      Sunny, you might be a little ahead of the game, calling this a “Secular Bear Market” only 3 weeks from the all-time highs!

    • michael says:

      This is a correction not a bear market. The bear market will not start until after the market tops some time in the fall.

    • Senny says:

      Love reading comments like this – I’m working my butt off to be able to play the market like you do, but am risk averse due to only learning about the market a year ago.

  38. Double D says:

    That “screaming” bounce was today. I trade the stock market everyday & I I’ve been fairly successful shorting individual stocks. The key is having a relatively tight stop in case it visciously goes against you – like today.

    Just when you thought maybe it couldn’t get any crazier, it does. Just more from the anals of crazy town. I looked at my charts last night and thought maybe the ES at 4500 and GC (gold) at 1880 by Fri. March 2020 wasn’t that long ago. Crazy just equates to business as usual on wall street.

  39. phleep says:

    If in fact a claimed PPT is propping prices up at these multiples in vaporware companies, overlaid on the recent abuses of credit, they are gambling with unprecedented drunkenness with our future. They are in the casino tippling with the tin hat bored apes crowd.

    • sunny129 says:

      phleep

      Reflex bounces (dead cat bounce?) are common & expected in ongoing secular Bear mkt. Study previous Bear mkts!

      • nick kelly says:

        This Salem crowd is determined to see evil hands behind fluctuations in a stock market. WR didn’t predict a rally because he’s a believer in those occult forces. He told us why he did: it’s normal.

      • phleep says:

        sunny 129

        Thanks, I’ll study that. But my comment was really more aimed at reality-testing the conspiracy theory voiced above of a plunge protection team maneuver, and its implications. Hence the opening words “If in fact” …

  40. Depth Charge says:

    Meanwhile, back in the real world, inflation is crushing the masses who have absolutely zero exposure to stocks.

    • Harvey Mushman says:

      Yep, that is true. I am glad the market recovered, because now the Fed can stick with the hiking of rates. No excuses at this point.

      • Jake W says:

        not if they use the volatility and “uncertainty” as a reason not to taper and keep zirp in place. these criminals are certainly capable of it.

        • Harvey Mushman says:

          But we have the whole “inflation” thing that the Fed can’t ignore.

        • Jake W says:

          they’ll go back to describing it as transitory. powell will “unretire” the word.

        • Prophet says:

          Jake W,

          “they’ll go back to describing it as transitory. powell will “unretire” the word.”

          “Inflation has been somewhat elevated this year, though a portion of the rise in prices seems to reflect transitory factors.”

          -FOMC Statement, August 2004

      • georgist says:

        Yes that’s a very interesting point, thought the same myself.

      • historicus says:

        “No excuses at this point.”
        they’ll think up something

  41. Brent says:

    “You of little Faith,” Jerome replied, “why are you so afraid?”
    Then He got up and rebuked the Winds and the Sea, and it was perfectly calm.

  42. Marco says:

    Today’s Market was just a pathetic joke …things are so screwed

  43. Tom H says:

    Fabulous timing on release of this commentary and the bounce prediction.

    Some things dropped and bounced.
    Some things did not drop.
    Some things dropped but did not bounce.

    Stock indices all dropped and bounced.
    Gold, & some ag commodities held their ground and actually gained
    Lumber did NOT bounce

    Whatever any of this might mean to experienced market pro’s even a novice can see the machine (combine) is overheating, on fire, leaking oil, missing a wheel, and the operator fell asleep slumped over the throttle lever at full bore.

    .

    • MonkeyBusiness says:

      Yeah, Gold really surprised me this time around. It’s probably building a base before going up big the next time the Fed decides to print more money.

  44. Seattle Guy says:

    Wolf is right = RSI and MACD are screaming oversold. So we bounce…and we retrace either 30% or 50% of the drop before she rolls over again. My thought is to add to the shorts when it has retraced by that amount = now that the new trend is set to sloop DOWN and she stays under the 200 moving average. AAPL or MSFT EPS miss may tip this down some more. After taking it in the shorts last year ….it feels good to be short this year. :-)

  45. VintageVNvet says:

    bb say’s, ”bounce for the ages,” to follow your suggestion Wolf!!!
    Dead cat or other critter,,,, some of us with cash on the side will not go anywhere near this skunk by any name until ALL the indices are back to at least close to reality…
    Gonna stick with my suggested numbers from early 2020 if I remember correctly, the remembering part definitely not a done deal,,,LOL
    Seem to remember Old School and I somewhat close on our predicted numbers for dow and snp,,,

  46. Gman says:

    The Fed can manipulate the market but they can’t stop Putin.

    • TimTim says:

      But, over time, markets and their effects on the Russian people might.

    • MonkeyBusiness says:

      LOL. “B Says Russia Can Invade Ukraine So Long As They Avoid Hunter’s Gas Company” [Babylon Bee].

      That’s all you need to know. Heck the whole “limited incursion” statement now makes PERFECT sense.

      • Wolf Richter says:

        MonkeyBusiness,

        The “Babylon Bee” is a satirical magazine, in the style of the Onion. It’s a form of humor. If you take it seriously, you make a fool of yourself — and you become the laughing stock.

      • Wisdom Seeker says:

        I’m gonna make the call that “News and satire become indistinguishable” when an extraordinary popular delusion tops out and infects the minds of the most people.

        Sorta like “permanently high plateau”, or “let them eat cake”, or, “a new business of mutual profit, but no one to know what it is”.

        (On that last one – it’s the same as a SPAC – indicating that the SPAC concept originated with the South Sea Bubble in the 1700s…)

        The restoration of sanity is going to be really painful.

        • fajensen says:

          Here in Denmark most of the relevant and important news and analysis are quite often, and sometimes only, presented by satire programs.

          For example the background story around the news that the head of the Danish Military Intelligence Service was jailed right in Kastrup Airport for “revealing information that can damage the security of the country” was widely “satirised”.

          The hosts of that show were clearly daring the government to charge them, the whole thing is locked down over “National Security”, everything is Secret.

          Using satire, the satirists can get the inside story from someone, when they then tell it, and it is correct, it will be “obvious” if it ever gets to court that they are satirists and those are just pulling random stuff out of their ass, so maybe they just got lucky and guessed? Speculation is not illegal.

          If there was a court case raised, that would *confirm* the crazy talking, like, i don’t know, the laughably cray-cray rumours that someone high up was getting jailed over doing his job by telling the *actual official body* overseeing the Danish intelligence services that they are breaking the law by helping NSA spying on Danish citizens and hacking EU politicians, like Angela Merkel – all of which ended up in an official report and BooM :).

          I imagine the USSR worked a bit in the same way?

  47. Seen it all before, Bob says:

    That was one heck of a dip! What were the Buy The Dippers waiting for?

    I hope it wasn’t a Flubber coated dead cat.

  48. historicus says:

    Bear Market rallies are the most vicious ……

  49. qt says:

    Wolf,

    Would love to see an article on Margin Debts and the chart. Thanks!

    Qt

  50. Yort says:

    Bloomberg has “Stocks Storm Back…” headline currently and right below it is “Pentagon Readies Troops…”, so a lot of geopolitical events going on right now to scare markets up and down, along with Wed Fed meeting…oh and US carriers massing in the China Sea…so potential two front mega-wars no biggie for the famous JPow Put, for now….HA

    Bounce was widely expected before Fed meeting Wednesday, and why I closed my Russell Short hedge EOD last Friday. Good time to be an active trader with 4-5% daily market moves although you get tossed around easily and have to be careful and have trading platforms that don’t shut down during panic and mania active trading days. Futures volumes were 2x normal so the big guys pushed the markets down and up while retail got dragged along for the ride…

    • VintageVNvet says:

      Yort:
      Fairly clear RU and CH at least in the ”serious teasing strategy” part of their recent re-union, and very likely subsequent partnering, etc., similar to their combinations and early material and other support for outright war during the VN era, following similar egregious errors of diplomacy then and now.
      Such will probably continue a la the very similar challenges to the hegemony of the British Empire in the late 1930s; with what subsequent events this time, only time will tell.
      For now, with clearly absolutely no control over ”it”,,,
      WE the PEONS of both and any side(s) can only hope they, (that would be the ”owners”/oligarchs/”whatever” they,) can settle their differences without killing millions of WE PEONs as happened last time.

    • Phoenix_Ikki says:

      So tomorrow, we will see a load up on stock on all the major military contractors and suppliers…more ammo for another bull run.

  51. Bruce says:

    Covered my short this morning b/c COVID #s dropped a lot Sunday. Maybe a COVID relief rally coming???

    • Jackson Y says:

      COVID numbers are always down over the weekend, due to certain doctors/clinics (non-emergency) not being open.

      • Old school says:

        I will add that yesterday’s you tube posting (Monday) has the study graph’s from NY and CA so you can see for yourself.

        He got dinged a few days back by one of the fact check boards. He goes through the qualifications of the fact check board who all 9 are light weight journalists except for one who is a journalist with a science degree. These fact checkers are a joke.

  52. TimTim says:

    But…

    If an engineered rally today occurs just in time to validate a hawkish position tomorrow, might not the the rest of this month’s outlook still turn miserable?

  53. DR DOOM says:

    The Olde Wise Mug Dictum is intact. A new crop of players went into the breach on the dip ( supply zone) and more will step in. The Harvest is under way.

  54. MiTurn says:

    “And there better be a bounce soon or else I will have to revise the WOLF STREET dictum, immortalized on our beer mugs: “Nothing Goes to Heck in a Straight Line”:”

    Then go for a second edition with a new motto, graphics, and different glass supplier. It’d sell like hotcakes. I’d buy it.

  55. Kunal says:

    Tomorrow Fed will most likely make a U turn and markets will go crazy. We saw a preview of that today from -5% to +1% in few hours. Add to that easing geopolitical tension and stocks will rally like there is no tomorrow. And life will be as usual, rich becomes richer and poor becomes poorer. More homelessness, more inflation, its like any other sunny day in corrupt US.

    • Depth Charge says:

      This is comical. You actually think the FED is going to decide to just ignore inflation? Are you high right now?

      • Kunal says:

        Fed has ignored it for last 6 quarters, lying and making excuses one after other. Fed works for the rich, the sooner you understand the less poorer you will be.
        They have no choice. Between crashing stock and asset market and inflation they will always pick inflation.

        • Wisdom Seeker says:

          That’s not what they chose in 2008. They killed inflation even though it crashed the market for a time. But they stayed in power.

          The Fed works for the powerful. They have to slay inflation in order to retain their political power.

          The powerful lost some wealth in 2008-2009, but the masses lost a lot more. Ask Petunia. Ask anyone who lost everything in that recession; there were millions.

          The powerful can always get rich again after a dip, but only if they stay powerful.

    • somethingstinks says:

      “Everybody knows….” Leonard Cohen.

  56. Pea Sea says:

    I think the Facebook Medical University graduates may be the funniest thing about the comment section of this blog. Either that, or the people who take ZH seriously–but then there’s probably a substantial overlap.

  57. Finster says:

    Nice call, Wolf. I think we just got it. Call it a relief rally, dead cat bounce, whatever; but it’s probably a counter trend rally in a bear market. A series of lower lows and lower highs … we may be watching this one a while …

  58. Gabby Cat says:

    Wow! Would you look at that….It bounced like an overinflated kiddie basketball on a new court! Still nervous Wolf?

  59. Yancey Ward says:

    To me the interesting thing this morning was that bonds did nothing basically all day long.

    • Dazed And Confused says:

      Yes – that was strange – treasury yields were basically unchanged all day.
      Suggests there wasn’t a huge flight to safety that one would expect if the plunge was due to Ukraine war worries.
      Crude oil and natural gas quiet too.

    • Wisdom Seeker says:

      Sherlock Award! (Remember the story about the dog that didn’t bark – because it knew the murderer…)

  60. Depth Charge says:

    From everything I can gather by reading hundreds of comments online, people are angry about what happened today, citing it as just another example of how the entire system is rigged for the rich. They won’t even tolerate a bad day, while simultaneously stealing the future of almost everybody else.

    • Jake W says:

      right, the problem is that a market with this level of volatility is bad for everyone who doesn’t have inside information or the juice to move the market. obviously, intraday prices can change. but 5% reversals for no reason mean that if your buy or sell order goes in at the wrong time during the day, you’re out real money. a real market shouldn’t function like that.

      what is clear to me is that algorithmic trading needs to be banned. i can hardly think of a more parasitic and bad for society activity.

      • Depth Charge says:

        You mean you don’t like the idea of algos trading crypto with entire pension funds riding on it? What could go wrong?

    • Swamp Creature says:

      DC

      They will steal everything until there is nothing left to steal. Then they will go after your soul.

  61. Jackson Y says:

    Wolf asking for the stock market to go up? Hell must have frozen over.

    The market is still historically very, very richly valued by P/E, P/S, EV/EBITDA, and just about every other financial metric.

  62. Michael Engel says:

    Amazon landed on June 10 2020 fractal zone.
    Bear market rallies can last 3 – 5 weeks.

    • Depth Charge says:

      This isn’t a market, this is a rigged system.

      • phleep says:

        That, or some fairly different, divergent future states of the world seem readily possible, and various players are expressing opinions. Which is the very definition of a market.

        Such a scenario would explain today’s volatility without sinister actors.

      • Swamp Creature says:

        DC

        Its rigged alright, you bet

        And the house always wins.

  63. stoneweapon says:

    Traders had to close the gap down on open, they know the probabilities of closing gaps are extremely high, so might as well get it over with so we can move on down. This bear is just warming up :)

    • Howard says:

      This^. Stoneweapon knows what he/she’s talking about.

    • Diogenes says:

      Precisely. S&P at 4400 on its way to 2500 true value.

      Bonds a 45 degree down slope since last year
      S&P a 45 degree up slope!!
      Bonds at about same price as before COVID.
      S&P double the price at Covid!!

      You’ve come a long way up, baby.
      And, baby, you’ve got a long way down to go.

      Kept my puts placed in late December, and added some on today’s bounce.
      Hang on. Don’t get blown out.

      • Old school says:

        At 5000 and if inflation runs above 2% your very long term return is probably going to be around zero.

        At 2500 your long term return above inflation is going to be 3% – 5%. If you really want a long term return of 7% or more above inflation you better be hoping for an entry price around 1500.

  64. R2D2 says:

    First time ever in history that the Dow has fallen 1000 points, and reversed back into positive territory, on the same day.

    Historic day. Very volatile.

    Expect the Dow to fall back down again on Tuesday…

    • Depth Charge says:

      I said this same thing but Wolf said no.

      • Wolf Richter says:

        Depth charge,

        You didn’t say anything about 1,000 points. What you said was: “Such an obvious massive market manipulation has never before been seen.”

        And I replied:

        “Nah, just a massive bear-market reversal followed by a bounce. There were huge bear-market reversals and much bigger bounces during the March 2020 crash — leading to huge one-day rallies. This is March 2020, S&P 500, daily percent moves, posted March 21, 2020. The craziest rallies happen in bear markets:”

        And I posted the chart of the March 2020 volatility.

        There were lots of reversals. The 1,000 points is meaningless because the Dow used to be under 10,000. Now it’s over 30,000. In percentages terms, there have been bigger reversals.

    • Harvey Mushman says:

      It was one HECK of a show… Like the Bills and the Chiefs yesterday, Amazing!!!

    • Wisdom Seeker says:

      The number of Dow points is irrelevant, it’s the percentage change that counts.

      Today’s move was only medium-sized by March 2000 standards, and it was downright small by October 2008 standards.

      The correction could be over, or the bear could just be getting up on its legs. Very hard to tell.

  65. Prophet says:

    I’ve just read the article and the comments, and I must say I’m quite impressed because nobody has asked Mr. Richter that question that always seems to come up….

    • Yort says:

      @ Prophet – Yes enquiring minds want to know…did they ever fix that mangled power pole outside your window Mr. Richter??? HA

    • Old school says:

      Don’t you know yesterday was brutal on some folks using margin on some of the high fliers. Must of had to self medicate to get through the day. Would have been terrible to have jumped out of the window too early.

  66. Harvey Mushman says:

    Hahaha!!!
    That’s pretty funny, I bet his poll numbers improve because of it!

    • Depth Charge says:

      It’s actually not funny, and don’t count on his poll numbers improving. This guy is wildly unpopular, and none of his actions have anything to do with making life more enjoyable for the masses. It’s all about totalitarianism and full dominance of human beings – a miserable police state where big brother charges you and makes you wait for permission at every turn.

  67. Depth Charge says:

    This guy appears to have an anger management issue, possibly dementia related. He’s WAAAAAAYY too old for the job. His mental faculties are clearly fading. I think there ought to be an age limit of 65 for your first term. That way if you’re reelected, the oldest you could be is 73 on your way out.

    • nick kelly says:

      Pres T stops over in Hawaii on way to Japan. Makes obligatory visit to Pearl Harbor Monument.
      On way over on ferry asks chief of staff Kelly: ‘so what is this about?’
      Kelly tells him about attack.

      Other nite on Fox, with T, Hannity is laying into current Pres and wonders ‘why he beats his head against a wall?’
      T replies: ‘I built 500 miles of Wall, it was all going well until..’
      He’s confused a figure of speech with his Wall.

      There are hundreds of these. Reagan was no genius but could remember his lines. T may be first Pres who is only semi-literate.

  68. drifterprof says:

    I have to admit feeling some schadenfreude, as well as satisfaction, that I got out of the growth fund bull ride at my 401k (TIAA-CREF) in April last year.

    It’s just a small tranche of my savings, but still, seeing it had risen by 14% (early last November) was losing an imagined psychological battle with the fund managers. They had warned clients in late 2020 that staying in cash (money market, etc.) would end up losing money.

    Now the growth fund is lower than when I sold – down 15.4 percent from the November high. That gives me a slight pleasant feeling, although such things are often temporary.

    • Old school says:

      Absolutely. It feels good when you get it right and terrible when you get it wrong.

      If I feel like I know what I am doing I can sleep well on a losing position and be under water for a long time. It’s the price you have to pay to be a value investor in a hot market.

  69. Softtail Rider says:

    Question = Is any one going to stop using Petro/ NG and their cellphone?

    • Old school says:

      I don’t know but I have decided I would ride a scooter so the Petro can be better used by Al Gore jetting off to Davos so he can help save the planet.

      • Old school says:

        I punched out the numbers, if I don’t drive my car for 20 years Al can make one round trip to Davos. Seems totally worth it to save the planet.

        • doug says:

          There is a reason ‘carbon footprint’ is gone from our vocabulary. Flying even once a year is a really awful ‘carbon footprint’. Can’t have that being pointed out.

    • tom15 says:

      Only the peasants. The elites will be kept warm & their jets fueled.

    • Dan Romig says:

      Since it is -14F outside, I admit to having my furnace on & burning Nat Gas. The thermostat is kicked up to a comfy 63F. Gotta have enough heat inside the basement to keep the water pipes from freezing, you know.

      And, that’s a nice temperature to be on the Kreitler rollers; since it’s a bit cold to ride outside today. (Getting old and not as tough as I used to be …)

    • Mora Aurora says:

      “Question = Is any one going to stop using Petro/ NG and their cellphone?”

      – Gave up cell phone two years ago = more free time.

      – More free time for home upgrades = less NG use.

      – More time for home/self upgrades = less car petrol.

      – Less car petrol = less chance of accident with cell
      phone distracted drivers!

  70. Dog Gone says:

    Jan 24th. Totally Predictable Monday market after Weekend Worries current market

    1/ 12 36290.32 Fri 1/ 21 34265.37 * vol 532.9*
    weekend worriers Monday sell off:
    1/ 24Drop bottom 33202.51 @12:35 PM
    Dip Buy to close at 34,364.50
    Tuesday Excepting News
    continued drop toward Fri 28

  71. Michael Engel says:

    1) Liquidate, liquidate, liquidate… but wait :
    2) SPX weekly log : Feb 10 2020 high to Nov 1 2021 high.
    3) A parallel from big red Oct 26 2020 fractal zone to Mon Jan 24 2022 low.
    4) A parallel from big green Mar 23 2020 fractal zone.
    5) Linear chart.

  72. Michael Engel says:

    6) SPX might imitate : Oct 2014 low, Aug 24 2015 low and Feb 2016 low.

  73. John says:

    Well when the fed had pumped the market and congress supplied all that stimulus, trading was great to the upside with a hold of bargain prices. The bounces will be different this time, with the fed mandate. No more transitory has to raise. Right Wolf? No need to answer just an acknowledgement, thanks again

  74. Winston says:

    Thank heavens for computer algorithms. When they give up, that will be bad… but more like economic reality. Coming: the end of the greater, greater fools era like the one that persisted for so long after the great depression?

    • Winston says:

      Adding to the kerfuffle (love that word) in Eastern Europe, two U.S. Navy carrier strike groups are now in the South China Sea as the Chinese Air Force flies 39 aircraft near Taiwan yesterday.

      Think the “elites” (GAG!) see something coming world economy wise that they’d never admit to publicly? Could this be the end of Rico?

      • Tom20 says:

        Yes joe and the gang are very concerned that the dc slush fund formerly know as the Ukraine is not shut down.

        Our southern border…not so much.

  75. georgist says:

    Futures suggest a double shift for the PPT.

    God speed boys and remember, this is America!

  76. Michael Engel says:

    In order to go down SPX must have a setup bar : a close < yesterday low and a trigger : a low below the lowest point of the setup bar.

    • Old school says:

      What if somebody sets off a dirty bomb on Wall Street? Seems like market might drop a little on that.

      • Brent says:

        Well,if the History is any guide Sept 16, 1920 explosion of horse cart packed with dynamite on Wall Street set off the biggest bull market ever.30 killed,143 seriously injured,nobody was caught…

      • fajensen says:

        Maybe in the beginning, but, What happened after 9/11?

  77. c1ue says:

    I see this as more of an attempt by the market to scare the Democrats and Fed into pulling back on its already modest inflation fighting – as opposed to the short term Fed meeting trend of ever stronger talk (and even some action).
    As I noted already in a comment that was not published (presumably due to the Br word), we will see if the Fed/Democrats are willing to make their PMC constituency feel poorer in order to fight inflation. 50/50 is my guess.

  78. billytrip says:

    It looks like the PPT better have plenty dry powder :)

    • ivanislav says:

      Wow, today rhymes with yesterday – do we rebound again? Tune in at 4pm Eastern to find out! I sure hope we keep drilling.

  79. Michael Engel says:

    1) QQQ gave a jab to inflation. Jabs in repetitions for 15 rounds.
    2) US put a threat on opponents. Threats are options, wars are full commitment, u never know how they end.
    3) The FANG will chop themselves. Humbled FANG constrict SPX, reduce the gap between the ultra rich and the rest, cut Pareto top.
    4) Yesterday was hell on earth. Stocks with a hinge, a gap lower, with
    a full body and no/ small buying tail, on high volume, might do well.

  80. Michael Engel says:

    SPY a spike to ignore ?

  81. Swamp Creature says:

    All the lemmings who listened to the likes of Jim Cramer, the corrupt main stream media and the 1 million financial advisors are now lined up for the slaughter. I’m sittng on the sidelines watching the carnage.

    • OutWest says:

      When will the buy and hold enthusiasts start to bail? I’m on the sidelines as well and will be until the bloodletting subsides.

  82. Island Teal says:

    Must be some interesting conversations right now at the big Retirement focused houses 💸💸💸

  83. Phoenix_Ikki says:

    Dear PPT, I believe we need you to work OT and extra hard today. Market is not looking too good right out of the gate? Will you please work your magic today and let us close up green again?

    Or are you guys purposely taking a break since Papa Powell is sharing his insight later? “wink wink”

  84. gorbachev says:

    Am I to understand that Powell will still be buying while increasing interest rates.

    • Wolf Richter says:

      The sequence is this:

      1. End QE (by mid-March or sooner).
      2. First rate hike expected for March 16.
      3. Start reducing the balance sheet.

      From what they have been saying, they will raise short-term rates maybe 4 times this year but start unloading the balance sheet very soon to allow long-term rates to rise. Much of the heavy lifting will be done by unloading the balance sheet to bring up long-term rates. That seems to be the new strategy.

      • Prophet says:

        When the Fed starts reducing the balance sheet, will it be by allowing bonds to mature and not replacing them? Or will it be by the aforementioned in addition to selling bonds? Will the Fed sell bonds at the same time the Treasury is selling bonds (I don’t mean exact same time, just that they’re both selling bonds)?

      • Prophet says:

        From today’s FOMC press event:

        “We do want the balance sheet to be reduced primarily by adjusting reinvestments.”

        That sounds like, for the time being at least, current assets will be allowed to mature and will not be replaced but that there will not be any substantial selling of assets. A passive stance, if you will, regarding balance sheet reduction. Again, for the time being.

        I can only hazard a guess that the Fed does not want to be in competition with the Treasury when it comes to selling bonds.

      • sunny129 says:

        Fed jawboned the whole thing again! Just words, buy no real action. All awaiting and monitoring until March! Just monitoring (LOL!)

        Only surprise announcement was ( to my greatest surprise) Fed will be no longer be accomodative, here after. No more ‘fixes’ for the addicts, was the strongest hawkish remark late this afternoon!

        • Wolf Richter says:

          The bond market got it! Yields spiked. Stocks fell. The party is over. Now there are more rate hikes coming than expected, to higher levels than expected, with more balance sheet reduction than expected.

          What did you expect? That the Fed would do all this in one day??? Don’t be silly. The Fed will spring no surprises on the market. It is letting the markets know in advance what it will do so that markets can adjust to id, and they’re adjusting to it by higher yields and lower prices. But not all in one day, but spread out over years.

          Article coming.

        • sunny129 says:

          Wolf

          ‘Now there are more rate hikes coming than expected’

          Yes, that’s what Mr. Powell said but nothing to address the inflation, out there, right now! Why still buying MBSs and Treasuries another 2-3 months? He also said ( correct me if I am wrong) rate will increase after the QT starts! There are a lot ifs along with’ will monitor’ the situation, blah, blah!

          Sorry, for being pessimistic. Fed has NO credibility left with me. 13 yrs of mis-managed monetary policies have hardened me, not to believe the guysand gals at Eccles bulding!

          Mind this is the same gang, who brought us TWO boom-bust scenerios (2000 & 2008) already in this century. They created this 3rd largest ‘everything’ buble as a ‘cure’ for all their failed policies since 2000, starting with Greenspan and the same policies carried by Barnake, Yellen anf now Mr. Powell. Their actions will have a long impact on American’s Economy for the next decade!

          I grew up in an era where there was Fed chairman like Mr. Volcker who had more integrity, than ANY one who followed him! There was NO insider trading scandal among FOMC at that time. Also Mr. Volcker stood up again the wishes of Mr. Prez Reagon!
          Now there is mid term elections coming up less than 10 months! Will Powell keep his credibility by walking his talk? I have serious doubt about that.

          Compare how the Savings & Loan scandal was handled during 90s by the director Resolution Trust Prof Bill Black( author of the way to rob Bank is own one). Many Bank executives went to jail unlike after 2008! It is a night & day compared to Fed and sad.

          Having seen our ‘Free Mkt Capitalism’ murdered openly, with NO protest or challenge from any one ( in this land – birth place of modern Free Mkt Capitalism, which USA tried to export to other countries!?) I don’t trust any one at Fed. People they say, they had to do, during 2008 to ‘save’ the economy! They just covered all their failings with more insane credit creation! What will say thia time? No one saw this coming? or yeh blame it on Covid, right? Guess I am too old and cynical

        • Wolf Richter says:

          “He also said ( correct me if I am wrong) rate will increase after the QT starts!”

          Rate increases start on March 16 (liftoff) and there may be one or two more rate increases, before the balance sheet “shrinkage,” as he calls it, starts.

          Hot off the press – explains it all:
          https://wolfstreet.com/2022/01/26/yields-spike-stocks-dump-futures-fall-asia-sags-after-powell-explains-how-the-fed-will-crack-down-on-inflation/

        • Swamp Creature says:

          sunny129

          Yep, and then here comes a new variant, and the economy tanks and all of a sudden the Fed puts all its plans on hold. I want to see action, not words. So far I’m only seeing words.

        • Sunny129 says:

          ‘The Fed will spring no surprises on the market’

          Like what he did the 4th qtr of 2018, sudden turn around. 2.5% to 0.25% and more QEs without ‘any advance notice’ when it suits to save the asset bubble or 3 Trillions immediately showered to save the bubble again in the March of ’20. Of course, Covid was the excuse. Now what? Covid is still us, Now there is a talk new Omicron variant B.2 from WHO. Fed will say anything and do anything to save their ‘agenda’! Sorry, there goes again my cynical mind!

        • Wolf Richter says:

          Sunny129,

          The Fed raised rates in Dec 2018 but then signaled that it would halt rate hikes. And it halted rate hikes in 2019, and eventually in mid-2019 halted the balance sheet reduction after months of notice. The Fed gave markets lots of notice of the upcoming changes before it implemented the changes. That’s how the Fed now operates. It announces everything in advance. That’s what it did today too.

          The only time it doesn’t announce in advance is in an emergency, such as the pandemic when it met over the weekend and announced rate cuts and new QE on Sunday night. But that’s an emergency.

  85. TeacupDragon says:

    Interesting data today from a blogger who writes as “mrtopstep”. His creds: Danny Riley is a 39-year veteran of the CME trading floor. He has run one of the largest S&P desks on the floor of the CME Group since 1985.

    “I don’t care what anyone says, we have never seen these types of moves ever. Not in the 1987 crash, not in the 2000 tech bubble, not during the 2008 credit crisis, and not in the 2010 flash crash.

    There has never been a time when the Nasdaq falls 868 points from its high to the session low, then rallies 818 points into the close. Nor have we seen the ES rally over 200 points in just a few hours.

    When I was doing the UBS S&P program trading at my desk in the S&Ps, the PitBull warned me that program trading killed the XMI and that someday it would ‘kill’ the S&P/stock market.

    I think yesterday was what he was talking about.

    3.7 million ES contracts were traded on Monday, while algorithmic and high-frequency trading make up 75% to 80% of the daily volume. If that was the case yesterday, it means 2.960 million contracts came from program trading. I’m not saying that’s an exact number, but rather, these programs dominate the index futures and stock market. ”

    Any thoughts?

    • Elvis' Bass Guitar says:

      Fundamental analysis never works in a correction. Entry point is a roll of the dice. Technical analysis is pretty much worthless as well. Remember 8300 dow back in 08? That run to 6600 was not expected at all, even with buffoon in chief saying it was a good time to buy. Its all bs gab until you make a decision to enter. Stop watching cnbc and bberg and fxbus right now. They know even less than you do. Its a corrupt casino and has always been so. The commentor who said one has better odds in vegas is right. Just under 50/50 on blackjack table. How many times have you’all been clocked in stock market for that one good run? 4 to 5 times down for one good run? That 4 to 1 against you. Not good odds.

      • sunny129 says:

        Elvis’ Bass Guitar

        This surreal bull mkt wouldn’t have happened if NOT for Fed’s ultra lose monetary policies, encouraging animal spirits and persistent Fed’s put!
        Investors went on, bidding/binging up every stock in sight,mindlessly with borrowed money (margin debt) rode them until this year. Fed/CBers Congress and the regulatoes are explicitly complicit in this scandal, where most of the retail investors will end up holding the bag, as recorded in mkt history!

        Now comes the other part – descending and unwinding all the excess built up and then some, again going south. Nothing secret here. just read the mkt history of last 200 yrs!

        As George Santaya said ‘ Those who ignore the past are condemned to repeat’
        AMEN!

    • Phoenix_Ikki says:

      Ugh….once again the Matrix has got to us…death by algo. This is the future we want right?

    • Wolf Richter says:

      TeacupDragon,

      I stopped reading when I came to this from the blogger you cited:

      “There has never been a time when the Nasdaq falls 868 points from its high to the session low, then rallies 818 points into the close.”

      Because…

      At the peak in 1987, the Nasdaq was at 450.
      At the peak in March 2000, the Nasdaq was at 5,000.
      At the peak in November, it was at 16,000.

      Do you see what this braindead moron of a blogger was doing with his 868-point drop??? He should have discussed percentage drops.

    • historicus says:

      Some funds are written to simply be LONG above certain averages and be SHORT or OUT below certain averages.
      What averages are important to them? The 200 day simple moving average is one often discussed.
      So, algos and AI are busy on days when markets flirt with or violate these “important” averages.
      Seems a simple trading model, but imagine the money made to blindly be long if the market stays above an average like the 2200 day.
      It is my opinion that High Frequency Traders pull away on wild days….
      their money is made “knicking” order flow, but wild gyrations are not their friend IMO.

    • sunny129 says:

      TeacupDragon

      Individual investors, who think critically, especially when the suppressed ‘funamentals’ are etrupting like NOW, after 13 yrs of ultra,ultra lose monetary policies have an advantage over the ‘group’ think of the Wall st pundits, gurus and financial media. They all want you buy& hold (hope!?) That’s for their self financial interest, NOT yours!

      During GFC, by reading, free, reliable/credible financial blogs ( with no conflict of interest) I knew by late 2006, that some thing brewing under neath re sub-Prime mortages. That knowledge helped me successfully weather 2008 crisis, losing zilch. But after it is different story under Crony/Predatory Capitalism

      Now the reality on the ground and the slow aware of fundamentals, individuals can navigate, irrespective of the coming bear mkt. Mind you, this is NOT an investors mkt, just for experienced, nimble option traders!
      Judicious use of leveraged bear ETfs (paired with long ones to cut down loss by whiplash) and options, can preserve and even grow one’s portfolio. It will be long and have to be patient.

      Been in the mkt since ’82. The surreal mkt which began since March of ’09, when the our good ole genuine ‘Free Market Capitalism’ was to put rest by Fed, fed by ultra lose monetary policies have lulled most newbies (45y or under) that stocks will ALWAYS go up! Now they will learn the other hardclesson – What goes up and up, the fall will be harder than usual!

  86. Michael Engel says:

    Tomorrow JP will thank institutions and Putin, nine times, for doing his job.

    • historicus says:

      Someone will be playing a drinking game tomorrow…
      every time “we’ll keep a close eye on it” is mentioned, take a swig.

    • dishonest says:

      A thermonuclear exchange should send the market to the moon. Or at least into the stratosphere.

  87. Seen it all before, Bob says:

    Thank you Wolf for your excellent predictions and data!

    As I use my rare WolfStreet mug to ponder when I should buy stocks again, I looked at your data data on the biggest losers. With the pandemic winding down, I also looked at the stock prices above from the pre-pandemic December 2019 to gauge the bloat caused by the pandemic and latest Fed “free money” from the last 2 years:

    Company Current Price Dec 27 2019 Price %change
    1 Moderna $144.36 19.52 640%
    2 Netflix $365.57 329.09 11%
    3 Signature Bank $302.14 138.53 118%
    4 Xilinx $173.99 98.42 77%
    5 DISH Network $29.57 35.95 -18%
    6 Lincoln National Corp. $63.36 58.74 8%
    7 NVIDIA $218.76 59.22 269%
    8 Expedia Group $163.32 108.32 50%
    9 Freeport-McMoRan $38.46 13.03 195%
    10 Enphase Energy $118.25 26.76 341%

    I would definitely avoid the triple digit growth stocks. They have a long way to fall to post-pandemic normalcy. (Unless you know they justify triple digit growth within 2 years. ie Nvidia growth is from gamers and bitcoin miners).

    I might look at stocks that have taken a beating back to 2019. ie Netflix, Dish, Lincoln. Maybe Expedia as travel and dining out opens.

    I wish I had owned these stock back in 2019 so I could sell them now with triple digit returns.

  88. Escierto says:

    The PPT had another day in the trenches trying to get into positive territory by the close. You have got to admire them working away like beavers trying to build a dam against the forces driving market down. They will prevail is their motto.

    • sunny129 says:

      Esciero

      Didn’t work today, did it?
      They may try every day, until they (may or may NOT) realize that they are fighting against erupting ‘fundamentals’ suppressed arteficially since ’09!
      It is the KARMA of Fed biting back!

  89. Michael C Giannone says:

    Any opinion on how TIPS will perform over the next few years?

  90. ivanislav says:

    The intervention started at 1pm on the nose and continued diagonally upward to 3pm. You could fit it with a ruler. Fake market.

  91. Michael Engel says:

    1) AAPL entered in the cloud. BRK inside T&K, with a large buying tail, bigger than yesterday.
    2) Warren Buffett likes dividends. US gov pay him negative rates. Jabbing QQQ in repetition will chop AAPL but give WB positive rates.
    3) The $700B cannot buy IWM. Guppies can.
    4) Innovative businesses don’t care about high interest rates. Success might triple value within few years. AAPL 2009 @$200, before x7 split and
    a x4 split, is worth 28 X $162 = $4,536/ share.
    5) AAPl was surfing on buybacks and dividends, producing follow ups for years. Few old sweetheart and boring pussycats have negative shareholders equities.
    6) Amazon was down $1000 yesterday. After a bear market rally AMZN might enter BB #1 : Apr 16/ 21 2020, or 2461/ 2279.66,
    1400/[3700 – 1600] = 67%. AMZN might not be able to make a new all time high.
    7) MSFT Alamut Castle was attacked by the “Assassin Creed”. MSFT
    dynasty RIP.

  92. dishonest says:

    Here Kitty, kitty, Kitty.

    • GoingUpThenDown says:

      If the spread between the 10-yr & 3-mo treasury is still reliable (big “if”, in view that the FED controls both ends), we’re still a couple of years away from the peak

  93. Swamp Creature says:

    With all this carnage on Wall Street the Fed will get cold feet and back off any interest rate increases in March. No way they are going to do any meaningful tightening into a sagging economy. Larrey Lindsy, former Bush head of Concil of Economic Advisors agrees. He says we are going to be in a recession. I believe we are in one right now.

    “The more things change, the more they remain the same”

    • Swamp Creature says:

      About 75% of the restaurants here that were open prior to the Pandemic are now closed and out of business. The remaining 25% are hangin on for dear life. Nearly every Chinese restaurant is closed. This is occurring in relatively affluent neighborhoods. If this is a great economy as J Powell just said today, then I’d hate to see what a bad one would be. This clown is totally full of s$it.

  94. Matt says:

    On the same note, a new post from GMO: “Let the Wild Rumpus Begin”

    “All 2-sigma equity bubbles in developed countries have broken back to trend. But before they did, a handful went on to become superbubbles of 3-sigma or greater: in the U.S. in 1929 and 2000 and in Japan in 1989. There were also superbubbles in housing in the U.S. in 2006 and Japan in 1989. All five of these superbubbles corrected all the way back to trend with much greater and longer pain than average.

    Today in the U.S. we are in the fourth superbubble of the last hundred years.”

  95. Harrold says:

    Wolf, you need to learn the art of talking out of both sides of mouth. You expect a rally any day now… on the other hand things could get worse fast.

    That way you can say you were “right” and never “wrong”. This is the wall street way and they all have yahts.

    I love how the pundits are already saying the correction is over, before the fed has even raised 1/4 point. Unless inflation calms down volatility could last a long time. The supply chain will be a mess for at least a year.

  96. Kunal says:

    Stock is already rising. I said that the mild correction will be over the moment Fed opens its mouth. Well looks like it’s happening even before Fed said anything. Everyone please itch on your table top that Fed works for the rich and it will never allow assets and stock to crash, no matter what inflation is or geopolitical situation is or debt level is. Please don’t be stupid and fight corrupt Fed and rich elite in USA else you will lose your shirt. Wolf should become a bit more optimistic so people who follow his data and predictions do not lose everything.

    • sunny129 says:

      Kunal
      How do you feel at 4pm today? Going to catch the falling knives again, tomorrow!

      There is an old saying ‘ Mr Mkt always wants more DIP buyers on his band wagon before taking plunge again’ It gets repeated in every secular BEAR mkt, the usual event not unexpected!
      Indexes were very high on the open! I said to myself, why are investors are so giddy, when Fed is going to ouline ( or atleast jaw bone their intent) their plans to rise rates & and begin QT!? Inflation is still here and most likely go up, again by next month! Stocks remain overvalued. Supply chain squeeze still remains – Fed cannot do a thing about it! Labor mkt is tight and Wage increase is on its way and Oil is over $87 over abarrel
      The only message Fed was clear ‘ Fed can NO longer be accomodative, here after’! That’s the clearest BEAR bell ringing!

      Any one who understands basic finance/economy, the above are NOT conducive to growth in economy! DIP buyers will get their punishment, repeatedly in the coming months. Green on open and red at close! Repeat and rinse!
      B/w the FUNDAMENTALS and the reality on the ground cannot be ignored, like in past 13 yrs!

  97. Turtle says:

    Good grief, Wolf; S&P up 1.5% today already!

    • sunny129 says:

      Turtle

      The show NEVER ends until 4pm when Post Fed announcement slowly sink into investors mind. This will be repeated again & again, until the DIP buyers cannot handle the repeated plunges, NOT unusual in the secular Bear mkt, we are in! Golden opportunity to those experienced nimble option players to make $ when indexes fluctuate several hundred points within a day!
      Again this mkt is for traders and NOT for investors!

    • Wolf Richter says:

      Turtle,

      Was up. Ended in the red. That expected bounce fizzled a lot quicker than I thought it would.

  98. Kunal says:

    All talk no action.
    Most corrupt Fed ever.

  99. Swamp Creature says:

    J Powell opened his mouth today and the market dropped 700 points! He revealed that he doesn’t know what the hell he is doing nor what he will do in the future. He said he is going to look at the data.

    As I posted before, if the economy shows signs of slowing down, all rate hikes and QT will be off the table.

    • sunny129 says:

      Swamp creature
      ” if the economy shows signs of slowing down, all rate hikes and QT will be off the table”

      Don’t think so! Credibility, if any left, of Fed is at stake. If consumers & businesses feel that the Fed is ‘out of control’ inflation will flare up all over! The rate is ZRP – nothing more to cut! Back to the QEs means, the Fed has no more tools in their box!

      He just ‘jawboned’ again with words but NO immediate action. Postponed to March but he did say Fed can be NO longer accomodative! The latter is the first time, Fed said ‘ the easy-peasy’ money will be turned off!

      Indexes were flying high on the open ignoring overvaluation, in spite of Fed is go outline their ‘plans’ on QT & rate increase, Oil at 87$ going up, Covid death rate highest since Jan ’21 and no immediate action by Fed on inflation. Supply chain squeeze persists!

      This is what I having saying the investors remain under the ‘PAVLOVIAN” dependent syndrome instilled by Fed by their loose monetary policies since ’09! NOT easy dor addicts to understand no more ‘fix’ is coming. DIP still keep jumping into the mkts, until they get the message! May be after March?

      • Swamp Creature says:

        sunny129

        The Fed doesn’t have to worry about losing credibilty. It already has zero. You can’t get any lower.

        • sunny129 says:

          ‘You can’t get any lower’

          Oh, YEH! They will and if they could get away with it!

          Remember, last year, Mr Powell invented ( by circumventing the Congress and the laws governing Fed) SPL ( Special Purpose Vehicles) to save the Corpo & Junk bonds by buying them (jusy buying MBSs!)

          Now, would I be surprised, He ‘invented or conconctioned ‘ some type ‘vehivle’ to buy stocks by buying index ETFs, like BOJ and the Bank of Sweden has done? NO! Ms. Yellen is already on the record in the past that Fed should be allowed to buy stocks/ETFs to maintain financial stability!? I bet the Congress and the regulators will gladly go along with it!

          They have absolutely NO scruples!

  100. Swamp Creature says:

    Last year Pelosi traded 5 million worth of individual stocks. Some were in companies which she had direct Congressional oversight responsibility. She is worth over $250 million. She wants more. She wants it all. They don’t call this place the Swamp for nothin.

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